Soda Pop, Sales Tax Targeted To Cut Deficit

(Reuters) – Warning of a “death spiral” without drastic changes, a group of experts on the U.S. federal budget deficit on Wednesday called for a 2011 Social Security tax holiday, a soft drink tax and government spending freezes.

In an ambitious plan to slash the deficit and the fast-mounting national debt, the group also called for a new 6.5 percent national sales tax, as well as lower and simpler individual income and corporate tax rates.

Former Federal Reserve Vice Chairman Alice Rivlin and former Republican Senator Pete Domenici — both veterans of Washington’s long-running deficit wars — headed the 19-member group organized by the Bipartisan Policy Center, a think tank.

Domenici called the deficit “a quiet killer” undermining the economy and compared the effort required to vanquish it to the sacrifices made by Americans during World War II.

At an event to unveil the center’s plan, Rivlin said its twin goals were to boost the economy and “drastic tax reform.”

It comes as a presidential commission targeting the same problem reconvenes on Wednesday for another closed-door session with just over two weeks before its final report is due.

Americans are worried about the deficit and want action, polls show, but politicians cannot agree on tax hikes and spending cuts, even though experts say both are needed.

Federal Deposit Insurance Corp Chairman Sheila Bair said at a conference in New York on Wednesday that she did not see short-term risk from the deficit. But she said, “There is a systemic risk to the financial system if structural deficits are not credibly addressed over the next few years.”

Dramatic proposals unveiled last week by the leaders of the presidential commission were widely dismissed as unworkable taken as a whole. But they did succeed at grabbing the spotlight for an issue that U.S. voters earlier this month in the midterm elections made clear is a top concern.

http://www.reuters.com/article/idUSTRE6AG31U20101117